The Motley Fool

Want Upside? Forget Cannabis Stocks And Buy This 1 Company

Image source: Getty Images

The holiday is going to be critical for cannabis stocks. With Canopy Growth expanding its CBD operations south of the border and HEXO introducing a cut-price brand, pot producers are going to be hoping that the market is hungry for the full range of the Cannabis 2.0 asset types, including drinks, topicals, vape products, and edibles.

Smoking and vaping could eventually be overtaken by users preferring to imbibe cannabis-infused drinks to get their hit. Indeed, the drinks section of the cannabis market could be worth somewhere in the billions over the next four years. However, this market will be tested critically over the holiday period, so investors can either get in now or wait and see how the sector shakes out in 2020.

Not every investor seeking rich capital appreciation over a relatively short time frame has the stomach for the wild swings in cannabis share prices, though. While still carrying risk of its own, there’s another asset class that could reward bold investors over the holiday season: luxury clothing. Falling in the consumer discretionary bracket, one stock in particular would suit those bullish on a U.S.-China deal.

Looking for upside? This stock could soar

Canada Goose (TSX:GOOS)(NYSE:GOOS) is a top stock to buy for a China relief rally. Investors who want to play the tailwinds of a possible breakthrough in the trade war between Canada’s two largest trading partners have a relatively small window of opportunity to do so, however, with a deadline of December 15. This is when the axe will fall, after which the prospect of another year of the trade war could come into focus.

The luxury clothing space is looking interesting at the moment, though, meaning that if Canada Goose tanks on a no-deal, investors might want to double down on the parka producer rather than sell. Speculation has been rife that Kering may be looking to snap up Moncler, for instance. The possibility saw Moncler’s shares leap 8.5%.

The deal making and its popularity with investors show that brands in the luxury apparel space — including Canada Goose — can see steep gains driven by events. By teaming up, companies in this space can also better withstand the risks involved in expansion in high-growth markets such as China. Canada Goose is in a good position to capitalize from the renewed interest in the sector.

This bullishness diminishes some of that trade war risk. If Canada Goose were to be seen as a possible takeover target, its shares would also likely increase in price. For example, this week saw Burberry, Tod’s, and Salvatore Ferragamo rise — three businesses sometimes seen as potential targets for the same kind of deal-making that’s currently trending in the fashion world.

The bottom line

Upside can come from anywhere, but steep momentum can be hard to come by. Given the steep gains and deep losses that have become part of the cannabis investment landscape, capital gains investors should consider other sectors and asset classes, such as luxury clothing. As with cannabis, though, this holiday season is critical for retail stocks, so investors should exercise caution.

This Tiny TSX Stock Could Be the Next Shopify

One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting...
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago - before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!

Click here to discover how!

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Canada Goose Holdings. The Motley Fool recommends HEXO. and HEXO.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.